New report on student loans could bode well for Boehner

A student-loan program popular among most Democrats is more expensive than its advocates say, an independent PricewaterhouseCooper study to be released today shows.

The report is likely to make it easier for House Education and the Workforce Committee Chairman John Boehner (R-Ohio) to beat back calls for an expanded version of the program and get the higher-education reauthorization bill passed this year.

Erica Lusk

House Education and the Workforce Committee Chairman John Boehner (R-Ohio)

It would also give Boehner, who has indicated interest in becoming House Speaker, another key legislative victory. Boehner is credited with helping shepherd through the president’s No Child Left Behind bill, opposed by many conservatives for being too intrusive.

The 33-page report notes that there are two federally backed student loan programs: the Federal Family Education Loan Program (FFELP), or guaranteed student-loan program, which involves private lenders, and the William D. Ford Federal Direct Loan Program (FDLP), which entails direct government loans to students.

Supporters of the direct loan program, created in 1994 by President Clinton, have argued that it is more cost-effective because the federal government can borrow more cheaply than the private sector and, unlike private firms, does not have to generate a profit.

But, the report finds, “these comparisons … are flawed in ways that bias score-keeping in favor of the FDLP.”

David Schnittger, Republican spokesman for the House Education Committee, said the report would help convince many members to oppose direct lending.

“Chairman Boehner believes the members of our committee do not want to pass a bill that pays for student benefits with Monopoly money instead of real money,” Schnittger said. “To the extent this Pricewaterhouse-Coopers study shows the direct loan program doesn’t achieve the savings that advocates of directing lending claim it achieves, and helps members on both sides of the aisle recognize that direct lending expansion is not the silver bullet some have portrayed it to be, it is a positive development for the Higher Education Act reauthorization process.”

Schnittger added that the report, by clarifying questions about direct loans, would resolve one of many issues in the reauthorization debate.

Leading Democratic proponents of direct lending are Sen. Edward Kennedy (Mass.), ranking member on the Senate Health, Education, Labor and Pensions Committee, and Rep. George Miller (Calif.), ranking member on the House Education Committee.

Kennedy offered a tart response to the report.

“This is a report bought and paid for by the banks who want to protect the corporate welfare they get from the federal student loan programs,” he said in a statement issued by his office. “I think that students should be put first in these programs, not banks.

“We’ve got a bipartisan plan to let the secretary of education decide which student loan program is more efficient for taxpayers, and reward colleges and students that use it with increased financial aid. Under our plan, we could increase Pell scholarships by $1,000 each — paid for 100 percent by increased efficiency in the student-loan programs.”

The report was commissioned by the Education Finance Council, the National Council of Higher Education Loan Programs Inc. and the Consumer Bankers Association.

Schnittger said that 500 schools had dropped out of the direct-lending program since its inception.

Republicans said it was unclear how passage of the higher-education reauthorization bill would affect Boehner’s ambitions to become Speaker.

A House Republican aide estimated that Boehner is in a group of 10 or so Republicans who would like to succeed Speaker Dennis Hastert (R-Ill.).

“Maybe getting this particular bill passed helps a member in a particular way, and that’s something that they think about when it comes time to electing a Speaker,” the aide said. “But each member has their way of reaching out to other members.”